Changes / tightening on servicing for investors

[mugen]

My initial thoughts are if it slows down the rate at which investors can buy , further down the line , it will slow down new buildings , potentially raise rents and make it easier for the RBA to drop interest rates further .

The sum would be to increase returns on those with existing IP's and as cash flow improves , those who can borrow will buy more IP's as the returns have improved ... And prices go up again. .....

So does that put us back where we started ???



Cliff

Mate, the rental prices has alot of catching up to do before it'll allow the average investor to be in a position to borrow again to invest in another IP.

Plus, rental income used for servicing isn't as attractive as it would be due to the changes made to the servicing calculators.

 

[Mick C]

Anyone seeing any changes to fixed loan rates? Rolling over 1 year fixed rates could become a viable alternative to sitting on variable rates with no discount?

Some banks are or have been rolling out 2 set of fixed rate one for PPOr and one for IP ( you guessed it the rate for IP is higher)

 

[see_change]

Mate, the rental prices has alot of catching up to do before it'll allow the average investor to be in a position to borrow again to invest in another IP.

Plus, rental income used for servicing isn't as attractive as it would been before due to the changes made to the servicing calculators.

One issue is the average investor only has 1 IP . On somersoft , there are an unusually high number of multiple property owners .

We have 14 and made an offer , accepted on another yesterday .

I was planning on buying over ten more in the near future . I'm still happy to buy some , but not sure how many .

It will be interesting to see clearance rates in Sydney over the next weeks .

Cliff

 

[BayView]

Except APRA will seek more capital adequacy and that would affect business lending too.

That'll also put the brakes on the LIb's budget $20k incentive for small business I'd wager.

 

[perthguy]

Looks like we are all going to have to turn into property developers.
Buy 1 house, build 3, sell, rinse and repeat.

Except in my case it will be buy 1 house, build 3, hold, rinse and repeat. How am I going to finance the build though? That's all I'm wondering now.

 

[mugen]

On somersoft , there are an unusually high number of multiple property owners.

You are probably right on that one.

However, I wouldn't be so sure if the members on somersoft would represent a significant percentage of all investors.

Correct me if I'm wrong, many of the double digits property investors invest outside of the capital cities?

 

[danwatto]

Correct me if I'm wrong, many of the double digits property investors invest outside of the capital cities?

Not necessarily, in fact for myself the strategy we use strictly forbids it. Some people like regionals, but it's not most of us.

Lomas and other Gurus were big on the regional investing, and some even recommended mining towns . But you can find high yield in capital cities as well so I think many realise it's not really necessary.

What you'll most likely find instead though is that double digit property investors invest outside of their HOME city - diversifying to the other capital cities in other states. Once you get to double digit, the land tax can hurt badly if you don't diversify to other states or setup holding structures.

 

[see_change]

You are probably right on that one.

However, I wouldn't be so sure if the members on somersoft would represent a significant percentage of all investors.

Correct me if I'm wrong, many of the double digits property investors invest outside of the capital cities?

Out side our weekender , all our Properties are in capital cities . In the past we have held properties in Townsville and rocky .

Cliff

 

[ej89]

Any effect on family pledge loans or allied health/medical practitioner loans at 90% LVR?

 

[see_change]

Any effect on family pledge loans or allied health/medical practitioner loans at 90% LVR?

I'd assume so , but I'll find out tonight when we meet with our broker . Originally tried to catch up last week . But now I'm glad it's tonight ....

Cliff

 

[spludgey]

I was hoping to refinance with BankMECU at 88% LVR in early August. I fear that plan might be out the window.
But at least I managed to release over $150k today, so that should buy me another $600k worth of property or so.

 

[Redom]

Any effect on family pledge loans or allied health/medical practitioner loans at 90% LVR?

Not that i've noted yet ej89. I don't think MEDICOs or First home buyers are areas of specific concern to APRA though.

 

[Bran]

Is the tightening on lending enough to spark buying in places with lower entry costs? Is it enough to push the Sydney buyers north to Brissie for example?

Or is it more likely to slow all investor markets.

 

[Magnet]

So far we have had the following:

* Westpac group - Max 70% LVR for non residents.
* Westpac group - Increase their buffer on all new and existing Westpac loans.
* Macquarie - reduction in servicing for capacity for IO loans.
* AMP - no more taking other banks debts at actual repayments. This is a big one.
* AMP - no more 100% of rental income taken but now will use negative gearing.

Any others?

So am I reading this correctly...Westpac Group would include St George and they are now only approving investment loans for 70% LVR for a new Purchase?

 

[Redom]

So am I reading this correctly...Westpac Group would include St George and they are now only approving investment loans for 70% LVR for a new Purchase?

Just for foreigners at 70% LVR, down from 80%.
They also cut LVRs for Aussie non residents (expats) down to 80%.
Can still get normal resi IP LVRs for Aussie's.

 

[remingbi]

alan jones on 2gb a few days said that firstmac r writing record no of loans atm.
he also mentioned that they r not bound by apra regulations as the banks are
I'm thinking a lot more investors could use these type of lenders to get around apra hurdles??
euro 73 posted some brilliant posts about firstmac and their online division, loans.com.au

 

[Magnet]

Just for foreigners at 70% LVR, down from 80%.
They also cut LVRs for Aussie non residents (expats) down to 80%.
Can still get normal resi IP LVRs for Aussie's.

Thanks Redom! Glad I didn't make any bets on who was right with that one. Husband would have won...for a change!

 

[Richard Feynman]

Just want to throw some real-life numbers out there for those interested.

Previously, CBA had the discretion (in some cases) to assess repayments with other lenders at I/O if that's what you were paying. As of recently, that's no longer possible. They have to be P&I.

In my situation, with a small portfolio, that means my borrowing capacity fell > 1/3 of a million with one policy change.

 

[INVSTOR]

1. Yes. You can now ONLY get the advertised rates, whereas previously you might have gotten a further discount, on a case by case basis

2. marginally, as most lenders add a buffer to the actual rate when they calculate serviceability. As the actual rate is now going to be a little higher, serviceability will be marginally lower, like a bees whisker lower.

3. Nab have always been a little funny with I/O but there hasn't been any changes yet, though there's been a lot of speculation.

1) - Does that include variable also? NAB will only give advertised rate and no further discount? Does this include existing customers?
3) - When 5 yrs interest only is up, what's the likely hood of getting another 5?

 

[INVSTOR]

Yes, except at lower prices and higher rents than would otherwise have been the case. IMO this will severely hamper investment lending to the benefit of OOs, which is the balance APRA want to restore here. So probably a good time for PPOR upgrades!

Probably good times coming up for PPOR upgrades for people without IP's.